<PAGE>
Morgan Stanley Dean Witter North American Two World Trade Center,
Government Income Trust New York, New York 10048
Letter to the Shareholders April 30, 2000
DEAR SHAREHOLDER:
Strong crosscurrents buffeted the fixed-income markets during the six-month
period ended April 30, 2000. A Treasury buyback plan provided strong support
for the long bond, which eventually trickled down to intermediate-term issues.
Against this backdrop, the U.S. economy remained resilient in spite of rising
energy costs and higher interest rates, a matter of great concern to the
fixed-income markets. Even though the Federal Reserve Board raised interest
rates six times since last April, the economy has shown few signs of slowing.
Capital spending, construction activity and consumer spending remain high, and
the manufacturing sector is growing out of strong demand for U.S. goods. The
equity market has exhibited extreme volatility in response to both strong
economic growth and higher interest rates. Many analysts believe that the Fed
may take a more aggressive stance, as evidenced by a 50-basis-point rise in the
federal funds rate in May. Some analysts are already predicting additional rate
hikes by the end of this year. The end result of all these factors has been a
compromise of sorts, with U.S. Treasuries rallying impressively while yields on
mortgages, corporates and high-yield bonds remain unchanged or higher.
Mortgage-sector performance was led by the Government National Mortgage
Association (GNMA) subsector. Much of the return advantage of GNMAs during this
period was attributed to its superior credit quality, an issue that came to the
forefront of the market's focus as the result of concerns about changes in the
federal regulations of agency debt. Treasury Under Secretary Gary Gensler's
comments concerning the expanding role of government-sponsored enterprises
(GSEs) in the capital markets caused the price spreads between GNMA and Federal
National Mortgage Associations (FNMA) 6.0% pass-throughs to expand by
approximately three-quarters of a percentage point.
On nearly all accounts, the Mexican economy has performed better than expected
over the past six months. Despite the solid economic growth and the
strengthening peso, the trade deficit narrowed due in large part to an
<PAGE>
Morgan Stanley Dean Witter North American Government Income Trust
Letter to the Shareholders April 30, 2000, continued
increase in petroleum exports. The Mexican economy grew by 3.7 percent and
inflation declined to 12.3 percent in 1999. Early indications point to stronger
growth in 2000. The Canadian economy also continued to improve over the past 12
months, as unemployment rates declined and the Canadian dollar has remained
relatively stable.
PERFORMANCE AND PORTFOLIO
For the 6-month period ended April 30, 2000, the MSDW North American Government
Income Trust posted a total return of 1.55 percent, compared to 1.52 percent
for the Lehman Brothers Short (1-5) U.S. Government Index.(1)
As of April 30, 2000, 100 percent of the Fund's portfolio was invested in the
United States. TCW Investment Management Company (TCW), the Fund's sub-advisor,
continues to emphasize high-quality mortgage-backed securities (MBSs),
including various types of AAA-rated collateralized mortgage obligations
(CMOs), pass-through securities and adjustable-rate mortgages (ARMs).
The Fund is currently on the sidelines with respect to investing in both the
Mexican and Canadian markets. TCW continues to monitor these markets for
attractive investment opportunities relative to those in the United States.
LOOKING AHEAD
As the Fund enters into the second half of its fiscal year, TCW's outlook for
the mortgage-backed securities sector is favorable. The sub-advisor believes
that the four basic determinants of value in mortgage-backed securities, namely
absolute yield, spread versus Treasuries, prepayment risk and supply, have
recently converged to make mortgages substantially more attractive than they
have been at any other time in the past decade.
TCW cautions, however, that the fixed-income market's heightened sensitivity to
a shrinking Treasury supply is unlikely to be alleviated any time soon.
Treasury revenue is expected to surge over the next several months because of
tax receipts, which may cause the pace of Treasury buybacks to accelerate. The
lack of Treasury bond issuance, combined with the buyback program, will
maintain pressure on the yield curve to stay inverted. (An inverted yield curve
is an unusual situation where short-term interest
------------
(1) The Lehman Brothers Short (1-5) U.S. Government index measures the
performance of all U.S. government agency and U.S. Treasury securities with
maturities of one to five years. The performance of the index does not
include any expenses, fees or charges. The index is unmanaged and should not
be considered an investment.
2
<PAGE>
Morgan Stanley Dean Witter North American Government Income Trust
Letter to the Shareholders April 30, 2000, continued
rates are higher than long-term rates. Normally, lenders receive a higher yield
when committing their money for longer periods.) These factors are expected to
keep mortgage spreads vulnerable to further widening. Nonetheless, TCW's
current outlook on the mortgage sector is positive.
Mexican presidential and congressional elections will be held on July 2nd.
Although we believe that the risk of a crisis is minimal, political tensions
could have a destabilizing effect on the economy. TCW is also concerned that
external deficits may trend toward unsustainable levels over the next few
years, particularly if the peso does not begin to weaken and world oil prices
decline significantly from current levels. In addition, both the Mexican and
Canadian economies are vulnerable to any future economic slowdown in the United
States.
We appreciate your ongoing support of Morgan Stanley Dean Witter North American
Government Income Trust and look forward to continuing to serve your investment
needs.
Very truly yours,
/s/ Charles A. Fiumefreddo /S/ Mitchell M. Merin
---------------------------------- -------------------------------
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
3
<PAGE>
Morgan Stanley Dean Witter North American Government Income Trust
Fund Performance April 30, 2000
Average Annual Total Returns
----------------------------
<TABLE>
<S> <C>
Period Ended 4/30/00
--------------------
1 year 2.39%(1)
5 years 6.49%(1)
Since Inception (7/31/92) 4.09%(1)
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE. WHEN YOU SELL FUND SHARES, THEY MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST.
---------------
(1) Figure shown assumes reinvestment of all distributions and does not
reflect the deduction of any sales charges.
4
<PAGE>
Morgan Stanley Dean Witter North American Government Income Trust
Portfolio of Investments April 30, 2000 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U. S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES (60.9%)
$ 2,196 Federal Home Loan Mortgage Corp.
ARM ..................................... 7.234% 03/01/25 $ 2,247,194
7,932 Federal National Mortgage Assoc. .......... 7.00 01/01/04 7,826,375
562 Federal National Mortgage Assoc. .......... 9.50 06/01/20 573,233
997 Government National Mortgage
Assoc. II ARM ........................... 6.00 * 986,037
14,645 Government National Mortgage
Assoc. II ARM ........................... 5.50 08/20/29 14,368,998
8,811 Government National Mortgage
Assoc. II ARM ........................... 6.00 07/20/29-
09/20/29 8,712,737
13,175 Government National Mortgage
Assoc. II ARM ........................... 6.375 05/20/23-
06/20/25 13,221,155
13,694 Government National Mortgage
Assoc. II ARM ........................... 6.75 08/20/22 13,757,216
3,680 Government National Mortgage
Assoc. II ARM ........................... 7.125+ 10/20/24-
12/20/24 3,697,263
------------
TOTAL U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES
(Identified Cost $65,630,257)......................................... 65,390,208
------------
COLLATERALIZED MORTGAGE OBLIGATIONS (26.4%)
U.S. GOVERNMENT AGENCIES (23.5%)
7 Federal Home Loan Mortgage Corp.
1370 K (PAC I/O) ........................ 1,089.16 09/15/22 201,599
4,693 Federal Home Loan Mortgage Corp.
2061 CD ................................. 7.50 02/15/27 4,584,739
12,321 Federal Home Loan Mortgage Corp.
G21 M ................................... 6.50 10/25/23 11,180,780
730 Federal National Mortgage Assoc.
1993-163 A .............................. 7.00 03/25/23 693,017
3,734 Federal National Mortgage Assoc.
1993-167 M (PAC) ........................ 6.00 09/25/23 3,563,397
5,000 Federal National Mortgage Assoc.
G96-1 PJ (PAC) .......................... 7.50 11/17/25 5,031,250
------------
TOTAL U.S. GOVERNMENT AGENCIES
(Identified Cost $26,916,798)......................................... 25,254,782
------------
</TABLE>
See Notes to Financial Statements
5
<PAGE>
Morgan Stanley Dean Witter North American Government Income Trust
Portfolio of Investments April 30, 2000 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PRIVATE ISSUES (2.9%)
$ 1,767 Residential Funding Mortgage
Security I, 1997-S12 A10 (PAC) .......... 6.70% 08/25/27 $ 1,755,767
1,306 Resolution Trust Corp. 1991-6 C1 .......... 9.00 09/25/28 1,306,957
------------
TOTAL PRIVATE ISSUES
(Identified Cost $3,169,316)........................................... 3,062,724
------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Identified Cost $30,086,114).......................................... 28,317,506
------------
SHORT-TERM INVESTMENTS (13.3%)
U.S. GOVERNMENT AGENCY (a) (9.3%)
10,000 Federal Home Loan Banks
(Amortized Cost $10,000,000)............. 5.88 05/01/00 10,000,000
------------
REPURCHASE AGREEMENT (4.0%)
4,359 The Bank of New York (dated
04/28/00; proceeds $4,361,122) (b)
(Identified Cost $4,359,011)............. 5.813 05/01/00 4,359,011
------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $14,359,011).......................................... 14,359,011
------------
TOTAL INVESTMENTS
(Identified Cost $110,075,382) (c).................... 100.6 % 108,066,725
LIABILITIES IN EXCESS OF OTHER ASSETS ................ (0.6) (618,259)
------------
NET ASSETS ........................................... 100.0 % $107,448,466
============
</TABLE>
---------------------
ARM Adjustable Rate Mortgage.
I/O Interest-only securities.
PAC Planned Amortization Class.
* Security purchased on a forward commitment with an approximate principal
amount and no definite maturity date; the actual principal amount and
maturity date will be determined upon settlement.
+ A portion of this security is segregated in connection with a security
purchased on a forward commitment basis.
(a) Purchased on a discount basis. The interest rate shown has been adjusted
to reflect a money market equivalent yield.
(b) Collateralized by $4,448,339 U.S. Treasury Bond 6.375% due 09/30/01 valued
at $4,449,874.
(c) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $190,001 and the
aggregate gross unrealized depreciation is $2,198,658, resulting in net
unrealized depreciation of $2,008,657.
See Notes to Financial Statements
6
<PAGE>
Morgan Stanley Dean Witter North American Government Income Trust
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2000 (unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $110,075,382).......................... $108,066,725
Receivable for:
Interest .............................................. 575,484
Principal paydowns .................................... 16,313
Prepaid expenses ......................................... 11,037
------------
TOTAL ASSETS .......................................... 108,669,559
------------
LIABILITIES:
Payable for:
Investments purchased ................................. 996,550
Plan of distribution fee .............................. 64,140
Investment management fee ............................. 55,588
Shares of beneficial interest repurchased ............. 33,746
Accrued expenses ......................................... 71,069
Contingencies (Note 9) ................................... -
------------
TOTAL LIABILITIES ..................................... 1,221,093
------------
NET ASSETS ............................................ $107,448,466
============
COMPOSITION OF NET ASSETS:
Paid-in-capital .......................................... $341,571,695
Net unrealized depreciation .............................. (2,008,657)
Accumulated undistributed net investment income .......... 113,693
Accumulated net realized loss ............................ (232,228,265)
------------
NET ASSETS ............................................ $107,448,466
============
NET ASSET VALUE PER SHARE,
12,713,073 shares outstanding
(unlimited shares authorized of $.01 par value)......... $8.45
=====
</TABLE>
See Notes to Financial Statements
7
<PAGE>
Morgan Stanley Dean Witter North American Government Income Trust
Financial Statements, continued
STATEMENT OF OPERATIONS
For the six months ended April 30, 2000 (unaudited)
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ............................... $ 3,471,079
------------
EXPENSES
Plan of distribution fee ...................... 406,839
Investment management fee ..................... 360,075
Professional fees ............................. 121,646
Transfer agent fees and expenses .............. 96,584
Registration fees ............................. 27,108
Trustees' fees and expenses ................... 6,298
Custodian fees ................................ 4,542
Other ......................................... 1,345
------------
TOTAL EXPENSES ............................. 1,024,437
Less: expense offset .......................... (4,187)
------------
NET EXPENSES ............................... 1,020,250
------------
NET INVESTMENT INCOME ...................... 2,450,829
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain ............................. 785,318
Net change in unrealized depreciation ......... (1,589,338)
------------
NET LOSS ................................... (804,020)
------------
NET INCREASE .................................. $ 1,646,809
============
</TABLE>
See Notes to Financial Statements
8
<PAGE>
Morgan Stanley Dean Witter North American Government Income Trust
Financial Statements, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
APRIL 30, 2000 OCTOBER 31, 1999
---------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................ $ 2,450,829 $ 7,068,155
Net realized gain (loss) ............................. 785,318 (3,955,389)
Net change in unrealized depreciation ................ (1,589,338) 2,776,303
------------ -------------
NET INCREASE ...................................... 1,646,809 5,889,069
------------ -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ................................ (2,337,136) (6,221,679)
Paid-in-capital ...................................... - (1,056,747)
------------ -------------
TOTAL DIVIDENDS AND DISTRIBUTIONS ................. (2,337,136) (7,278,426)
------------ -------------
Net decrease from transactions in shares of beneficial
interest ........................................... (12,163,946) (28,748,862)
------------ -------------
NET DECREASE ...................................... (12,854,273) (30,138,219)
NET ASSETS:
Beginning of period .................................. 120,302,739 150,440,958
------------ -------------
END OF PERIOD
(Including undistributed net investment income of
$113,693 and $0, respectively)..................... $107,448,466 $ 120,302,739
============ =============
</TABLE>
See Notes to Financial Statements
9
<PAGE>
Morgan Stanley Dean Witter North American Government Income Trust
Notes to Financial Statements April 30, 2000 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter North American Government Income Trust (the "Fund")
is registered under the Investment Company Act of 1940, as amended (the "Act"),
as a non-diversified, open-end management investment company. The Fund's
investment objective is to earn a high level of income while maintaining
relatively low volatility of principal. The Fund was organized as a
Massachusetts business trust on February 19, 1992 and commenced operations on
July 31, 1992.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS - (1) portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest available bid price prior to the time of valuation; (2) when market
quotations are not readily available, including circumstances under which it is
determined by Morgan Stanley Dean Witter Advisors Inc. (the "Investment
Manager") or TCW Investment Management Company (the "Sub-Advisor") that sale or
bid prices are not reflective of a security's market value, portfolio
securities are valued at their fair value as determined in good faith under
procedures established by and under the general supervision of the Trustees
(valuation of debt securities for which market quotations are not readily
available may be based upon current market prices of securities which are
comparable in coupon, rating and maturity or an appropriate matrix utilizing
similar factors); and (3) short-term debt securities having a maturity date of
more than sixty days at time of purchase are valued on a mark-to-market basis
until sixty days prior to maturity and thereafter at amortized cost based on
their value on the 61st day. Short-term debt securities having a maturity date
of sixty days or less at the time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS - Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
The Fund amortizes premiums and accretes discounts based on the respective life
of the securities. Interest income is accrued daily.
C. FOREIGN CURRENCY TRANSLATION - The books and records of the Fund are
maintained in U.S. dollars as follows: (1) the foreign currency market value of
investment securities, other assets and liabilities and forward foreign
currency contracts are translated at the exchange rates prevailing at the end
of the period; and (2) purchases, sales, income and expenses are translated at
the exchange rates prevailing on
10
<PAGE>
Morgan Stanley Dean Witter North American Government Income Trust
Notes to Financial Statements April 30, 2000 (unaudited) continued
the respective dates of such transactions. The resultant exchange gains and
losses are included in the Statement of Operations as realized and unrealized
gain/loss on foreign exchange transactions. Pursuant to U.S. Federal income tax
regulations, certain foreign exchange gains/losses included in realized and
unrealized gain/loss are included in or are a reduction of ordinary income for
federal income tax purposes. The Fund does not isolate that portion of the
results of operations arising as a result of changes in the foreign exchange
rates from the changes in the market prices of the securities.
D. FORWARD FOREIGN CURRENCY CONTRACTS - The Fund may enter into forward foreign
currency contracts which are valued daily at the appropriate exchange rates.
The resultant unrealized exchange gains and losses are included in the
Statement of Operations as unrealized foreign currency gain or loss. The Fund
records realized gains or losses on delivery of the currency or at the time the
forward contract is extinguished (compensated) by entering into a closing
transaction prior to delivery.
E. DOLLAR ROLLS - The Fund may enter into dollar rolls in which the Fund sells
securities for delivery and simultaneously contracts to repurchase
substantially similar securities at the current sales price on a specified
future date. The difference between the current sales price and the lower
forward price for the future purchase (often referred to as the "drop") is
amortized over the life of the dollar roll.
F. FEDERAL INCOME TAX STATUS - It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
G. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - The Fund records dividends and
distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which
may differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
11
<PAGE>
Morgan Stanley Dean Witter North American Government Income Trust
Notes to Financial Statements April 30, 2000 (unaudited) continued
2. INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS
Pursuant to an Investment Management Agreement with the Investment Manager, the
Fund pays the Investment Manager a management fee, accrued daily and payable
monthly, by applying the following annual rate to the net assets of the Fund
determined as of the close of each business day: 0.65% to the portion of the
daily net assets not exceeding $500 million and 0.60% to the portion of the
daily net assets exceeding $500 million.
Under a Sub-Advisory Agreement between the Investment Manager and the
Sub-Advisor, the Sub-Advisor provides the Fund with investment advice and
portfolio management relating to the Fund's investments in securities, subject
to the overall supervision of the Investment Manager. As compensation for its
services provided pursuant to the Sub-Advisory Agreement, the Investment
Manager pays the Sub-Advisor compensation equal to 40% of its monthly
compensation.
3. PLAN OF DISTRIBUTION
Morgan Stanley Dean Witter Distributors Inc. (the "Distributor"), an affiliate
of the Investment Manager, is the distributor of the Fund's shares and, in
accordance with a Plan of Distribution (the "Plan") pursuant to Rule 12b-1
under the Act, finances certain expenses in connection with the distribution of
shares of the Fund.
The Fund is authorized to reimburse the Distributor for specific expenses the
Distributor incurs or plans to incur in promoting the distribution of the
Fund's shares. The amount of each monthly reimbursement payment may in no event
exceed an amount equal to a payment at the annual rate of 0.75% of the Fund's
average daily net assets during the month. Expenses incurred pursuant to the
Plan in any fiscal year in excess of 0.75% of the Fund's average daily net
assets will not be reimbursed by the Fund through payments accrued in any
subsequent fiscal year. For the six months ended April 30, 2000, the
distribution fee was accrued at the annual rate of 0.73%.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The proceeds from sales/prepayments of portfolio securities, excluding
short-term investments, for the six months ended April 30, 2000 were as
follows:
<TABLE>
<CAPTION>
SALES/
PREPAYMENTS
--------------
<S> <C>
U.S. Government Agencies ......... $18,596,044
Private Issue CMOs ............... 1,335,087
</TABLE>
12
<PAGE>
Morgan Stanley Dean Witter North American Government Income Trust
Notes to Financial Statements April 30, 2000 (unaudited) continued
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager
and Distributor, is the Fund's transfer agent. At April 30, 2000, the Fund had
transfer agent fees and expenses payable of approximately $4,000.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
APRIL 30, 2000 OCTOBER 31, 1999
------------------------------------ ------------------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
---------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Sold .............................. 12,098,662 $ 102,751,690 10,687,742 $ 91,592,005
Reinvestment of dividends ......... 207,210 1,750,409 627,075 5,382,544
Repurchased ....................... (13,748,892) (116,666,045) (14,660,742) (125,723,411)
----------- -------------- ----------- --------------
Net decrease ...................... (1,443,020) $ (12,163,946) (3,345,925) $ (28,748,862)
=========== ============== =========== ==============
</TABLE>
6. FEDERAL INCOME TAX STATUS
At October 31, 1999, the Fund had a net capital loss carryover of approximately
$233,014,000 which may be used to offset future capital gains to the extent
provided by regulations, which is available through October 31 of the following
years:
<TABLE>
<CAPTION>
AMOUNT IN THOUSANDS
-------------------------------------------------------------------------
2002 2003 2004 2005 2006 2007
------------ ----------- ---------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
$ 53,086 $160,560 $14,716 $2,013 $152 $2,487
========= ======== ======= ====== ==== ======
</TABLE>
7. REVERSE REPURCHASE AND DOLLAR ROLL AGREEMENTS
Reverse repurchase and dollar roll agreements involve the risk that the market
value of the securities the Fund is obligated to repurchase under the agreement
may decline below the repurchase price. In the event the buyer of securities
under a reverse repurchase or dollar roll agreement files for bankruptcy or
becomes insolvent, the Fund's use of proceeds of the agreement may be
restricted pending a determination by the other party, its trustee or receiver,
whether to enforce the Fund's obligation to repurchase the securities.
Reverse repurchase agreements are collateralized by Fund securities with a
market value in excess of the Fund's obligation under the contract.
At April 30, 2000 there were no outstanding reverse repurchase or dollar roll
agreements.
13
<PAGE>
Morgan Stanley Dean Witter North American Government Income Trust
Notes to Financial Statements April 30, 2000 (unaudited) continued
8. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
The Fund may enter into forward foreign currency contracts ("forward
contracts") to facilitate settlement of foreign currency denominated portfolio
transactions or to manage foreign currency exposure associated with foreign
currency denominated securities.
Forward contracts involve elements of market risk in excess of the amounts
reflected in the Statement of Assets and Liabilities. The Fund bears the risk
of an unfavorable change in the foreign exchange rates underlying the forward
contracts. Risks may also arise upon entering into these contracts from the
potential inability of the counterparties to meet the terms of their contracts.
At April 30, 2000, there were no outstanding forward contracts.
9. LITIGATION
Several class action lawsuits, which have been consolidated for pretrial
purposes, were instituted in 1995 in the United States District Court, in New
York, against the Fund, some of its Trustees and officers, its underwriter and
distributor, the Sub-Advisor, the Former Manager, and other defendants, by
certain shareholders of the Fund. The consolidated amended complaint asserts
claims under the Securities Act of 1933 and generally alleges that the
defendants made inadequate and misleading disclosures in the prospectuses for
the Fund, in particular as such disclosures relate to the nature and risks of
the Fund's investments in mortgage-backed securities and Mexican securities.
The plaintiffs also challenge certain fees paid by the Fund as excessive.
Damages are sought in an unspecified amount. All defendants have moved to
dismiss the consolidated amended complaint, and on May 8, 1996 the motions to
dismiss were denied. The defendants moved for reargument and on August 28, 1996
the Court issued a second opinion which granted the motion to dismiss in part.
On December 4, 1996 the defendants filed a renewed motion to dismiss which was
denied by the Court on November 20, 1997. The Court has also certified a
plaintiff class pursuant to the Federal Rules of Civil Procedure. On or about
January 19, 2000 counsel for the plaintiffs and defendants signed and the court
preliminarily approved a Stipulation of Settlement and Memorandum of
Understanding settling all claims in the purported class action lawsuits.
Notice of the settlement was mailed to the purported class on February 8, 2000.
The fairness hearing on the settlement took place on April 26, 2000. At the
hearing the Court gave final approval on the settlement of this litigation. The
settlement will not involve any payment by the Fund.
14
<PAGE>
Morgan Stanley Dean Witter North American Government Income Trust
Financial Highlights
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
APRIL 30, 2000
----------------------
<S> <C>
(unaudited)
SELECTED PER SHARE DATA:
Net asset value, beginning of period ......... $8.50
-----
Income (loss) from investment operations:
Net investment income ....................... 0.19
Net realized and unrealized gain (loss) ..... (0.06)
-----
Total income from investment operations ...... 0.13
-----
Less dividends and distributions from:
Net investment income ....................... (0.18)
Paid-in-capital ............................. -
-----
Total dividends and distributions ............ (0.18)
-----
Net asset value, end of period ............... $8.45
=====
TOTAL RETURN + ............................... 1.55%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ..................................... 1.85%(2)(3)
Net investment income ........................ 4.41%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ...... $107,448
Portfolio turnover rate ...................... -
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31,
------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------------- ---------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA:
Net asset value, beginning of period ......... $8.60 $8.59 $8.39 $8.33 $8.89
----- ----- ----- ----- -----
Income (loss) from investment operations:
Net investment income ....................... 0.44 0.49 0.44 0.47 0.69
Net realized and unrealized gain (loss) ..... (0.09) (0.05) 0.19 0.04 (0.59)
----- ----- ----- ----- -----
Total income from investment operations ...... 0.35 0.44 0.63 0.51 0.10
----- ----- ----- ----- -----
Less dividends and distributions from:
Net investment income ....................... (0.38) (0.43) (0.43) (0.45) -
Paid-in-capital ............................. (0.07) - - - (0.66)
----- ----- ----- ----- -----
Total dividends and distributions ............ (0.45) (0.43) (0.43) (0.45) (0.66)
----- ----- ----- ----- -----
Net asset value, end of period ............... $8.50 $8.60 $8.59 $8.39 $8.33
===== ===== ===== ===== =====
TOTAL RETURN + ............................... 4.30% 5.13% 7.80% 6.38% 1.61%
RATIOS TO AVERAGE NET ASSETS:
Expenses ..................................... 1.81%(3) 1.69%(3) 1.65% 1.64% 1.59%
Net investment income ........................ 5.11% 5.52% 5.18% 5.71% 8.28%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ...... $120,303 $150,441 $212,040 $350,530 $658,307
Portfolio turnover rate ...................... 43% 8% - 13% 44%
</TABLE>
-------------
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Not annualized.
(2) Annualized.
(3) Does not reflect the effect of expense offset of 0.01%
See Notes to Financial Statements
15
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Mitchell M. Merin
President
Barry Fink
Vice President, Secretary and General Counsel
Philip A. Barach
Vice President
Jeffrey E. Gundlach
Vice President
Frederick H. Horton
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
SUB-ADVISOR
TCW Investment Management Company
865 South Figueroa Street, Suite 1800
Los Angeles, CA 90017
The financial statements included herein have been taken from the records of
the Fund without examination by the independent accountants and accordingly
they do not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus
of the Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus. Read the
prospectus carefully before investing.
Morgan Stanley Dean Witter Distributors Inc., member NASD.
MORGAN STANLEY
DEAN WITTER
NORTH AMERICAN
GOVERNMENT
INCOME TRUST
[Graphic Omitted]
SEMIANNUAL REPORT
APRIL 30, 2000
